WPI Spotlight

  • August 24, 2017
    During his presidential campaign, candidate Donald Trump often characterized the 23-year-old North American Free... NAFTA Renegotiation Begins
  • June 20, 2017
    Farmers in India want the Swaminathan Report recommendations implemented, including the suggestion that Minimum... Loan Waivers and MSP Issues in India
During his presidential campaign, candidate Donald Trump often characterized the 23-year-old North American Free Trade Agreement (NAFTA) with Canada and Mexico as a disaster for the U.S. He declared that he would withdraw from the trade pact if elected, claiming that it cost the U.S. jobs and caused a huge balance of trade deficits with those other two countires.

Mr. Trump’s opinions about NAFTA were consistent with his “America First” views, distrust of international trade agreements and populist fears of globalization. After being elected president, he then somewhat toned down his opposition and proposed a renegotiation instead; pulling out of the agreement was to be a last resort if it did not produce a satisfactory result.

The NAFTA renegotiation has now begun in Washington with formal statements from all three countries’ leading trade officials. Those from Canada and Mexico generally touted the benefits accruing to each signatory. However, U.S Trade Representative Robert Lighthizer bluntly cited what the Trump administration sees as the damage NAFTA has inflicted on the U.S. He declared that the U.S. government has determined it has cost 700,000 U.S. jobs. Moreover, he said that it is directly responsible for the U.S. trade deficits with Canada and Mexico, asserting that NAFTA must be revised in ways that eliminate or greatly reduce these imbalances. Mr. Lighthizer listed a number of changes the U.S. wants, including increasing the percentage of U.S.-made parts in autos shipped to it from Mexican factories.

The alleged benefits and/or harmful effects of NAFTA on the U.S. economy have been debated nonstop ever since it went into effect in January 1994. The treaty’s impacts on U.S. employment and trade deficit have been at the heart of the debate with vastly different views and interpretations of both given by pro- and anti-NAFTA interests. The effect on U.S. employment is a subjective assessment since an actual head count of net jobs lost/gained in a multiplicity of industries and activities as a direct result of trade with Mexico and Canada over a 23-year period is impossible. Mr. Lighthizer’s statement that the U.S. government has certified the loss of 700,000 jobs is curious. We are not aware that any of its agencies have certified any volume of lost jobs attributable to NAFTA, but the U.S. International Trade Commission did conclude that the jobs lost in some industries and gained in others because of the trade agreement are roughly offsetting. Some analysts conclude that advancing automation has had a greater impact on employment than NAFTA. However, since precise employment data directly related to the trade treaty is not possible, opponents are free to maintain their contention that it has been a job killer.

Opponents of NAFTA, including President Trump, argue that the U.S. trade deficits with Mexico and Canada are proof of its damage to the U.S. economy. The assumption appears to be that trade deficits by definition are bad for the U.S., or perhaps it is just those with Mexico and Canada. If they are problems, the U.S. has been in trouble for a long time. It has been running consistent trade deficits since 1976, thanks largely to imports of energy and consumer goods.

(This article was originally published in the 17 August 2017 issue of Ag Perspectives as part of the Common Thread column by Robert Kohlmeyer. Click here to find out more about subscribing to Ag Perspectives.)

WPI Spotlight

  • August 24, 2017
    During his presidential campaign, candidate Donald Trump often characterized the 23-year-old North American Free... NAFTA Renegotiation Begins
  • June 20, 2017
    Farmers in India want the Swaminathan Report recommendations implemented, including the suggestion that Minimum... Loan Waivers and MSP Issues in India